Forecast calls for lower prices amid increased production

Forecast calls for lower prices amid increased production

Heavier carcass weights continue to offset the reduced beef production wrought by the least overall beef production since 1993.

Although beef production continues lower this year, heavy carcass weights will likely pressure prices through the remainder of this year and into next as overall beef production increases.

“Cattle prices for 2015 and 2016 are reduced from last month on weaker demand and competition from other meats,” say analysts with USDA’s Economic Research Service (ERS), in the monthly World Agricultural Supply and Demand Estimates (WASDE) released Friday.

The annual average fed steer price for this year was lowered by $2 and $3 per cwt on either end of the range—compared with the August forecast—to $152-$155. The annual average for next year was lowered $3 on both ends of the range to $147-$159.

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“Beef production for 2015 is lowered due to a slower pace of slaughter in the third quarter, but the decline is partly offset by heavier carcass weights,” WASDE analysts say. “The forecast (beef production) for 2016 is raised as continued increases in carcass weights support higher beef production.”

Beef production so far this year is 4.4% less year-over-year, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. Last year, he says beef production was 5.7% less than the year before.

“Offsetting decreased cattle slaughter are cattle carcass weights averaging 820 pounds for the year to date; an increase of nearly 20 pounds year-over-year,” Peel says. “Carcass weights increased 12 pounds year-over-year in 2014.”

For perspective, Peel points out steer carcass weights are 17.5 pounds heavier so far this year at an average of 877 lbs. Heifer carcass weights are 15.7 pounds heavier so far this year, averaging 806 pounds.

There’s been plenty of chatter the past couple of years that packers will start hammering heavyweight carcasses with aggressive discounts. That hasn’t happened so far, for the same reason feedlots have been tacking on more weight—making do with fewer head of cattle.

Although total cattle slaughter for this year is projected to be 4.5% to 5.0% less, Peel explains, “Increased steer, heifer and cow carcass weights are expected to push average cattle carcass weights about 2% higher than last year. Total beef production is projected to be 2.5% to 3.0% lower than 2014; which would be the lowest total U.S. beef production since 1993.”

 

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